OPTIMAL ORDERING POLICIES WHEN ANTICIPATING PARAMETER CHANGES IN EOQ SYSTEMS

The classical Economic Order Quantity (EOQ) Model requires the parameters of the model to be constant. Some EOQ models allow a single parameter to change with time. The paper considers EOQ systems in which one or more of the cost or demand parameters will change at some time in the future. The system examined has two distinct advantages over previous models. One is that a change in any of the costs is likely to affect the demand rate, and this is allowed for. The second advantage is that often the times that prices will rise are fairly well known by announcement or previous experience. The optimal ordering policy is presented for these inventory systems with anticipated changes and a simple method for computing the optimal policy. For cases where the changes are in the distant future a myopic policy is presented that yields costs which are near-optimal.